Mary Kay: The MLM that ditched New Zealand (and Australia, too)
Bronwyn Rideout (April 4, 2022)
Country of Origin: Texas, United States of America
Year Founded:1963
Founded by: Mary Kay Ash
Year MLM established in New Zealand: Opened in Australia in 1971/1992 in New Zealand
Year MLM closed in New Zealand: March 5th, 2020
Generally sells: Face care and other cosmetics
“Cult” products: Oil-Free Eye Makeup Remover, Ultimate Mascara, Micellar Water, Hydrogel Eye Patches
Is there a buy-in?: $30 USD to do a website-only business or $130 USD for a starter kit with ~ $400 worth of product and business supplies
Name for workforce: Independent Beauty Consultants with other ranks and sub-ranks
Has a reputation for: Rank-buying, car payment scheme, toxic positivity, house parties, and everything being just so….pink.
Should you be worried?: Nothing to worry about from the MLM side of things at present, but everyone does (not) love a comeback. However, Mary Kay products can be bought online and some distributors may be holding on to old products to give to the unsuspecting.
Mary Kay is one of the ten oldest MLM companies and the 6th largest network marketing company. Mary Kay founded the company on the heels of some major disappointments including the loss of a promotion to a man she trained and the sudden death of her second husband. In the early years, Mary Kay sold through a traditional storefront as well as the house party operation used by other MLMs like Tupperware. The format of these parties does not appear to have changed much in the several decades since: Representatives would invite friends over for a facial and then give their sales pitch, not just for the product but also for the opportunity to get into the business and sell Mary Kay themselves.
The pitch is attractive on the surface, 50% commission on all products, but there are two problems. First is getting that phat commission into your wallet in the first place. If you aren't a cosmetics connoisseur, the $18 USD ($25) price of a basic red lipstick may elicit some eyerolls as the price point in New Zealand for store brands like Maybelline and L'Oreal can be $17 to $22 NZD. In the USA, however, the same store brand products can be purchased for significantly cheaper. Like, $2 or $3 dollars. Total.
Below is a screenshot of the same Maybelline lipstick sold at Wal-Mart and from Life Pharmacy in New Zealand.
So, relative to the American market, Mary Kay products are heinously overpriced to ensure the company still makes a profit while paying out the beaucoup commission to its representatives. Many consider it to be one of the more expensive make-up brands in the world. One could argue, as the MLM often does, that it charges more because of its higher quality ingredients and formulations; some former customers would argue otherwise.
In New Zealand, Mary Kay prices trended in a similar direction at a more sedate level of excess; shipping not included of course:
Moreover, earning said commission is a convoluted process. Commissions are not guaranteed unless you have “offered the opportunity” to at least one other Independent Beauty Consultant and both you and your recruit are “active”. Consultants are considered active “...in a particular month (and for the two months after) when they place at least $450 retail orders ($225 in discounted wholesale orders) for cosmetics intended for resale to end consumers during the month”.
At these prices and requirements, it is surprising that you will get much, if any, money at all. In 2019, 83% of consultants in Mary Kay Canada were not eligible to earn commissions.
And when they did, the amount wouldn't be enough to change anyone's life.
But this leads to the second problem with the 50% commission rate, which is that the costs of being a consultant will eat up any commission you've made and then some. Any profit gets reinvested into your business, both in terms of mail supplies as well as add-ons recommended by the MLM such as a branded website or front-loading products to use as giveaways or incentivise people to host your parties. Then there are regular meetings and conventions that you are expected to attend and pay for.
Maybe you got lucky and were part of the 1.675% of Canadian Mary Kay consultants (~587 out of 35,000 in 2018) who were commission eligible, you'll earn the opportunity to partake in the most infamous programme in all of MLM marketing: the career car programme. Many MLMs have a scheme like this, where high-ranking consultants “earn” a car; as long as consultants maintain their rank, Mary in this instance will pay all or part of the monthly leasing costs OR cash compensation for 2 years, dependent on net production the previous quarter. As Truth in Advertising Explains: If wholesale production (the wholesale value, not the inflated retail value, of product sold by the consultant and their downline) drops below $50,000 per quarter (or $17,000 per month), the consultant has to chip in between $90 to $900 as co-pay; if it drops below $32,000 then the MLM pays money and the consultant is on the hook. The trouble is, within the MLM culture there is a lot of pressure to perform and present a particular life of affluence that is courtesy of the MLM. Some MLMs go further by strongly recommending that consultants purchase a particular car. Arbonne has its white Mercedes and Mary Kay has its infamous pink Cadillac. These cars aren't cheap and if a consultant's wholesale sales drop before the end of the lease, then the car is less of a perk and more of a burden.
If one wanted a financially sustainable option, one could purchase a more affordable new car or used car and use the cash compensation instead. However, the cash amount will also drop according to the drop in wholesale production. Consequently, the number of Cadillacs are few, approximately 1,000 across the United States while 2,600 cars purchased through this programme are not. Nevertheless, the incentive to keep the compensation going means many consultants turn to inventory/front loading as Mary Kay bases their compensation schemes on the orders made by the consultants, not end sales to the consumer. When the consultant is unable to offload all of the inventory quickly, then that car bonus doesn't amount to anything extra at all.
On March 5th, 2020, Mary Kay ceased operating in Australia and New Zealand. It was a decision corporate had planned for and consultants were given a month to sell their stock; consultants on the other hand, were caught unawares and for the few that hit the higher levels of the pyramid, their lives were upended. In the wider landscape of MLMs Mary Kay was the surest of all bets so what happened?
Essentially, Australia and New Zealand are small fry on the world stage of Mary Kay and the MLM is quite strategic. Despite investing 21 million dollars to enter the Indian cosmetics market in 2007, Mary Kay pulled the plug on their business there in 2013, leaving 4,500 distributors in a lurch. While there are claims that Mary Kay's catalogue and house party business model is out of step with today's antipodean market, a spokesperson stated that a combination of rising costs was compounded by the smaller size of the AUS/NZ market.
But maybe the truth lies in Mary Kay's interest in expansion through Asia, China especially. Mary Kay launched there in 1995 as one of the first international cosmetic brands to enter that market. The company was involved in heavy lobbying of the Chinese government to lift restrictions on the MLM model, restrictions that were put in place due to associations with Falun Gong. It was a smart move because between 2009 to 2011, Mary Kay grew its salesforce from 200,000 to 600,000 consultants who brought in a profit that accounted for over 25% of the company's takings. In 2017 it set up a manufacturing centre in Hangzhou for this purpose and by 2019 Mary Kay is one of the most popular cosmetic brands in China. A New York Times article, however, demonstrates that Mary Kay is importing its exploitative practices alongside the face creams.
Mary Kay does not have a base of operations in New Zealand anymore but it is not time to celebrate just yet. If new consumer models arise or the pandemic cools off, who is to say that the MLM might just find a way to make the NZ market profitable again despite itself?
Until then, the tactics and pitfalls of being a Mary Kay consultant are repeating in other MLMs that still operate throughout this country.
Websites/Channels of interest on Mary Kay
The Pink Pyramid Scheme: How Mary Kay cosmetics preys on desperate housewives
John Oliver explains how companies like Mary Kay are pyramid schemes
Mary Kay Ex-Sales Director Tells all | Anti-MLM interview with Elle from Canada